Continuing to work did not constitute agreement to a pay freeze

Employees who continued to work and who did not take industrial action despite the introduction of a pay freeze were not deemed to have accepted the pay freeze as a variation to their contracts, the Court of Appeal has held.

The case of Abrahall v Nottingham City Council considered whether employees who carried on working despite the introduction of a pay freeze by their employer had been taken to have accepted the pay freeze as a variation to their employment contracts.

Nottingham City Council enacted a two-year pay freeze in 2011, which meant its employees no longer enjoyed incremental pay. This attracted fierce opposition from the trade unions, but industrial action did not take place, nor were any complaints made by employees. Nottingham CC emphasised that redundancies would be the only alternative, and enacted a further freeze in 2013. A large number of employees accordingly brought claims for unlawful deductions, arguing that the incremental pay was a contractual entitlement.

At the tribunal, the employment judge held that none of the employees had a contractual right to incremental pay, so rejected all of the claims. He did, in any event, go on to decide that if there was a contractual entitlement, continuing to work would not have amounted to an implied acceptance of the change.

In the appeal to the EAT, it was held that there were three distinct groups of employees, and one of those groups was contractually entitled to incremental pay. This groups’ claims were successful as the EAT agreed that the employees had not impliedly accepted the change. The two other groups’ claims were not successful. The Council appealed, which was dismissed by the Court of Appeal, and the two unsuccessful groups cross-appealed, which the Court of Appeal allowed.

The CA held that all three groups of employees had a contractual right to incremental pay. It then had to consider whether continuing to work meant they had impliedly accepted the variation to their contracts. Nottingham CC argued that the threat of redundancy meant the employees continued working, and this amounted to their acceptance. The CA rejected this argument.

The CA suggested that the unions or the members should have made an unequivocal statement when the pay freeze was implemented that it was not accepted, and should have made it clear that continuing to work was without prejudice to the fact that the variation was not accepted. Despite this, because the variation was wholly disadvantageous to the employees, and as the unions had made their objections known (even though they did not proceed to industrial action), the CA were unable to find that the employees had accepted the variation.

“This case suggests that acceptance of a variation of contract should only be inferred if the conduct of the employee in continuing to work does not give rise to any other reasonable explanation, other than acceptance. For employers, this means that they should be slow to rely on implied acceptance for contractual changes especially where the changes are clearly disadvantageous and objections to them have been voiced by employees or their unions prior to implementation. Instead, employers may need to consider taking the more drastic step of dismissal and re-engagement on new terms if they want certainty going forwards.”